Law change means fairer tax on redundancy payments

The Government has announced law changes to help protect redundant workers from being pushed onto a higher tax bracket when they receive lump sum redundancy payments.

The change was the result of an EPMU campaign for fairer treatment of redundant workers, and means workers will now be eligible for a tax rebate on their redundancy of six cents in the dollar up to $60,000.

This means a worker who gets a $20,000 redundancy payment would be able to claim a $1200 rebate. Workers gaining more than $60,000 in a payout would be eligible for a maximum rebate of $3600.

EPMU national secretary Andrew Little says the move is a step in the right direction.

“The EPMU and the Manufacturing and Construction Union have both pushed hard to try and restore some fairness on redundancy payments.

“Before 1992 redundancy was treated as a compensation payment rather than income and was taxed at just 5%. That went out the window with the last National Government and left many workers who’d lost their job having to pay the top tax rate on their redundancy.

“The real impetus for change came when the workers at South Pacific Tyres got a pretty raw deal on their redundancy, and together with the M&C Union we approached Paul Swain and Michael Cullen to get some changes made.

“We’re very pleased with the work they’ve done and it’s certainly a good step in the right direction.”

The new rebate will come into force by April and will apply to redundancy payments made on or after December 1, 2006.